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28 Sep 2019
1.
a, You own bonds with 7 years remaining to maturity. The bonds have a $10,000 par value, the coupon payment every year is $375, and the bonds have a yield to maturity of 4.9%. What is the current market price of these bonds?
b, If the bond in question a sold at par (price = face value), explain why the yield to maturity would be the same as the coupon rate.
c, What is the duration of a two-year bond that pays an annual coupon of 5%, returns the face value, and has a current yield to maturity of 4.5%. Use $1000 as the face value.
d, What is the duration of a two-year zero-coupon (principal-only) bond that is yielding 6% and $10,000 face value? Note: This bond does not have coupon payments but does return the face value.
1.
a, You own bonds with 7 years remaining to maturity. The bonds have a $10,000 par value, the coupon payment every year is $375, and the bonds have a yield to maturity of 4.9%. What is the current market price of these bonds?
b, If the bond in question a sold at par (price = face value), explain why the yield to maturity would be the same as the coupon rate.
c, What is the duration of a two-year bond that pays an annual coupon of 5%, returns the face value, and has a current yield to maturity of 4.5%. Use $1000 as the face value.
d, What is the duration of a two-year zero-coupon (principal-only) bond that is yielding 6% and $10,000 face value? Note: This bond does not have coupon payments but does return the face value.
Trinidad TremblayLv2
28 Sep 2019
